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RFM segmentation alone must die

Recency, frequency, and monetary value (RFM) are the ruling troika of segmentation-land. And like one of the old Soviet troikas, they brook no challenge to their rule (e.g., Trotsky, pictured at right, was murdered on Stalin’s orders with an ice ax).

But they are simply not good enough alone anymore. I tried to be civil about this in my post Beyond RFM. But beyond is not good enough. We need to let a million flowers bloom in the world of segmentation.

This means taking the “7-12 $15-$19.99 multi-donor” view of segment out for a date with your ice ax.

OK, not really. It’s still going to be a decent starting point. But it has to stop being the ending point. Even for those of us that have to leave complex modeling to people with more letters after their names.

So this week, I’d like to take you through various different ways of figuring out the all-important question “is communicating with this donor in this way going to help achieve my goals of net revenue, quality file growth, and/or world domination?”.

And the first topic that should be layered on is listening to what a donor’s behavior is telling you.

Part of this is non-donor behavior. You likely already have this information if you have the donor’s email. You can potentially tell if they’ve been to your Web site, how often, how long they spent, and what they looked at. You definitely should be able to know how they’ve reacted to emails you’ve sent them in the past. The difference in a lapsed donor who still regularly opens your emails and clicks on the articles versus one who, according to your email records, may or may not be dead is a significant one.

If you can get robust data, so much the better, because now you can not only include people in a communication they may not have received before, but also customize it based on what they are interested in.

But some of this is donor behavior you already know, but RFM filters out. Channel is one. Take an online donor who is reliable and frequent at donating online. If you’ve mailed her/him 25 times over the years to try to get him/her to donate, but s/he hasn’t responded, chances are that s/he doesn’t want to give through the mail. Personally, I’ve found telemarketing to be the most persnickety channel: those who give through it really give through it; those who don’t, really don’t.

Another is cadence. If someone has given you ten gifts in the past ten years and all of them have been in November or December, my money is on the fact that you can ease off the gas in May. One program of my acquaintance runs a membership campaign that starts every January. There is about five percent of their file that will give a membership gift like a clockwork every January or February and then nothing for the rest of the year. Should you stop trying to get extra gifts? No. Should you cut your cadence way down and save yourself some costs? Yes.

These are things the donor probably thinks they are telling you explicitly with their behavior. It’s now incumbent upon you to listen.